On November 1, 2023 the Department of the Treasury’s Federal Insurance Office (FIO) formally submitted a request to proceed with a climate-related financial risk data collection for homeowners’ multi-peril underwriting data (2023 Proposal). The announcement came on the same day Senate Budget Committee Chair, Senator Sheldon Whitehouse (RI) and Senator Ron Wyden (OR) sent letters to 41 insurers requesting information relating to the availability and affordability of homeowners’ insurance.
Among other things, the 2023 Proposal purports to curtail the amount of information requested and the number of insurers that are subject to the data collection. Specifically, the 2023 Proposal notes that FIO will request the completion of 7 data fields from nationwide homeowners’ insurance groups with 1% or more share of the homeowners’ insurance market, i.e., 14 groups and 240 homeowners’ insurers. (A similar FIO proposal in 2022 (2022 Proposal) considered the collection of 15 data fields from any homeowners’ insurer writing more than $100 million in direct premium plus any other insurer necessary to achieve an 80% market share in the ten states most prone to climate-related disasters.) Like the 2022 Proposal, the 2023 Proposal notes that specific insurer and insurance group data will not be published.
A Press Release associated with the 2023 Proposal notes that the FIO climate data call (Climate Data Call) will “obtain previously unavailable insurance data at a ZIP Code level … from the largest homeowners’ insurance providers … to understand[] how climate-related financial risks impact individuals and families across state markets and the United States.” The 2023 Proposal also cites President Biden’s 2021 Executive Order on Climate-related Financial Risk, which requires FIO to “assess, in consultation with States, the potential for major disruptions of private insurance coverage in regions of the country particularly vulnerable to climate change impacts” and recent volatility in certain property insurance markets as the basis for moving forward. The Executive Order has prompted FIO to undertake a number of climate risk-related priorities, including the publication of a June 2023 report on insurance supervision and regulation of climate-risk.
Similar to the 2022 Proposal, the 2023 Proposal concludes that “the data that FIO [is] proposing to collect [is] not available or [cannot] be obtained in a timely manner from state insurance regulators or other publicly available sources.” The 2023 Proposal goes on to remark that a potentially similar NAIC data call (discussed below) has no clear implementation timeline and questions whether all state insurance regulators are likely to participate in it.
The National Association of Insurance Commissioners (NAIC) has been highly-critical of FIO’s Climate Data Call, noting in a November 2022 Letter to Treasury that FIO “failed to demonstrate a good faith effort to engage with state regulators” and that “there are other data available in the public domain or with state insurance regulators that more specifically speaks to the risks faced in their market and the cost of catastrophic events.” Notwithstanding those comments, on August 15, 2023, the NAIC announced its own plan to issue a data call to better understand property markets and coverages and protection gaps. Among other things, the NAIC’s August 15 press release cites the fact that “many states lack granular data on how [increased frequency and severity of weather events, rising reinsurance costs, and inflationary pressures translate] to availability and affordability of coverage” as the basis for its proposed data call. Certain states have been focused on climate risk-related developments for some time including, most prominently, the implementation of a climate risk disclosure survey that was initially adopted by the NAIC in 2010 and substantially revised in 2022. To date, 15 states participate in the disclosure initiative.
Most recently – one day after FIO’s 2023 Proposal was published – the NAIC issued another press release stating that “the NAIC and the state insurance regulators it represents are uniquely positioned to best understand the challenges that both consumers and the insurance industry face as natural perils persist across our nation [and] the NAIC expects to ask property and casualty insurers representing a significant market share of homeowners’ insurance coverage to submit ZIP-code-level data across the US on premiums, policies, claims, losses, limits, deductibles, nonrenewals, and coverage types.” As of the date of this Alert, it is not known whether FIO and the NAIC will coordinate on their respective data calls. We will continue to monitor these developments.
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